{"id":4488,"date":"2019-01-03T14:28:09","date_gmt":"2019-01-03T19:28:09","guid":{"rendered":"https:\/\/www.fundamentalanalytics.com\/?p=4488"},"modified":"2019-01-03T14:28:11","modified_gmt":"2019-01-03T19:28:11","slug":"fundamental-analytics-monthly-newsletter-january-2019","status":"publish","type":"post","link":"https:\/\/www.fundamentalanalytics.com\/pt\/fundamental-analytics-monthly-newsletter-january-2019\/","title":{"rendered":"Fundamental Analytics Monthly Newsletter: January 2019"},"content":{"rendered":"

Fundamental Analytics Monthly\nNewsletter: January 2019<\/p>\n\n\n\n

Dados Fundamentalistas<\/strong><\/p>\n\n\n\n

United States Crude\nStocks<\/strong><\/p>\n\n\n\n

United States Crude Oil stocks\nhave been on a growth trajectory since mid-September, but have changed\nminimally in December (Chart 1, black line). A reduction in US production is\nunlikely unless prices remain low for an extended period of time. OPEC and Russia\nwill be cutting production in early 2019. Given current circumstances, prices\nfor Brent may be stabilizing around $56 and around $48 for WTI in the next few\nweeks.<\/p>\n\n\n\n

Chart 1<\/strong><\/p>\n\n\n\n

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Corn and Soybeans\nStocks to Usage Ratio<\/strong><\/p>\n\n\n\n

The world stocks-to-use ratio for corn and soybeans are at\nhistorically high levels. Growth in supply is outpacing growth in demand as can\nbe seen in Charts 2 and 3 below. The abundant supplies have contributed to the\nlow prices, and given the current fundamentals we would expect prices to stabilize\naround $3.70\/bu for corn and $8.80\/bu for soybeans over the course of the next\nfew weeks.<\/p>\n\n\n\n

Chart 2<\/strong><\/p>\n\n\n\n

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Chart 3<\/strong><\/p>\n\n\n\n

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Net Position of Funds\nas of DEC 18th<\/sup> <\/strong><\/p>\n\n\n\n

The net position of funds is the\ndifference between the non-commercial long positions and the non-commercial\nshort positions in a given market. If there are more long positions than short\nones, the net position of funds is positive. A positive net position of funds\nindicates that speculators anticipate rising prices, whereas a negative net\nposition of funds points towards weakening prices. The net position of funds\nboth leads and lags pricing trends, and often extends their effects. Table 1\nbelow shows whether the net position of funds is positive or negative for a\nselect group of commodities as of December 18th<\/sup>.<\/p>\n\n\n\n

Table 1<\/p>\n\n\n\n
\n Commodity<\/strong>\n <\/td>\n Net Position of Funds<\/strong>\n <\/td><\/tr>
\n Crude Oil (light\n sweet NYMEX)\n <\/td>\n POSITIVE<\/strong>\n <\/td><\/tr>
\n Natural Gas (NYMEX)\n <\/td>\n POSITIVE<\/strong>\n <\/td><\/tr>
\n Gold (CMX)\n <\/td>\n POSITIVE<\/strong>\n <\/td><\/tr>
\n Corn (CBOT)\n <\/td>\n POSITIVE<\/strong>\n <\/td><\/tr>
\n Soybeans (CBOT)\n <\/td>\n POSITIVE<\/strong>\n <\/td><\/tr><\/tbody><\/table>\n\n\n\n

Platform Potential<\/strong><\/p>\n\n\n\n

The commodity market research platform offered by\nFundamental Analytics is intuitive and easy to use. The highly customizable\nyear-on-year default visualizations offer a superb tool for creating and\nvisualizing spreads against their historic levels. Research by Joel Fingerman\nin late November exemplifies the value of the spread functionalities of the\nFundamental Analytics platform. <\/p>\n\n\n\n

Note: The comments below reflect updates and commentaries\nthat we send regularly to our distribution lists. Because some time has now\npassed since its original release, the content below should not be regarded as\nup-to-date market commentary. If you\nwish to receive this type of analysis in a timely fashion, please let us know.\nIn addition, you can conduct your own research by subscribing to our research\nplatform. <\/strong>For more information give us a call at (859) 687-2748 or visit www.fundamentalanalytics.com<\/a>.<\/p>\n\n\n\n

Commentary originally from the third week in November: <\/p>\n\n\n\n

During the recent\ndramatic decline in Crude Oil prices since the beginning of October the prices\nof the refined products of Heating Oil and Gasoline have also decreased.\nHowever, Heating Oil prices did not decline as much the Crude Oil prices, so\nthe price spread difference between Heating Oil and Crude Oil, the “Crack\nSpread,” increased in value (Chart 4, black line). Since the beginning of\nOctober, the refiners’ profit margin in Heating Oil has increased.<\/em><\/p>\n\n\n\n

Chart 4<\/em><\/strong><\/p>\n\n\n\n

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Conversely, during the\nsame time period Gasoline prices declined greater than Crude Oil prices, so the\nGasoline Crack Spread decreased in value (Chart 5, black line below). <\/em><\/p>\n\n\n\n

Chart 5<\/strong><\/em><\/p>\n\n\n\n

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Given the refined\nproducts different rates of decline, the product spread of January Heating Oil\n–January Gasoline increased from 30 cents at the beginning of October to as\nmuch as 60 cents before settling back (Chart 6, black line below ). With\nHeating Oil (Diesel Fuel) in strong demand and Gasoline having lower demand\nduring the Winter Season, it is not surprising that Heating Oil prices\noutperform Gasoline prices, even in a down market.<\/em><\/p>\n\n\n\n

Chart 6<\/strong><\/em><\/p>\n\n\n\n

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As can be easily understood such analysis can increase\ntrading profit margins and we would be happy to work with you if you are\ninterested in trying our platform for free. <\/p>\n\n\n\n

Weekly Commentary\nSummary<\/strong><\/p>\n\n\n\n

Fundamental Analytics offers timely weekly commentaries tied\nto reporting from the DOE, as well as weekly reports on crude oil and natural\ngas. We also offer a weekly commodity market update highlighting developments\nin agricultural and energy markets. If you are interested in receiving any or\nall of these updates, please let us know. Below are some summaries of our\nDecember Commodity Market Updates.<\/p>\n\n\n\n

Note: The comments below reflect updates and commentaries\nthat we send regularly to our distribution lists. Because some time has now\npassed since its original release, the content below should not be regarded as\nup-to-date market commentary. If you\nwish to receive this type of analysis in a timely fashion, please let us know.\nIn addition, you can conduct your own research by subscribing to our research\nplatform. <\/strong>For more information please give us a call at (859) 687-2748 or\nvisit www.fundamentalanalytics.com<\/a>.<\/p>\n\n\n\n

December 4<\/strong><\/p>\n\n\n\n

Energia<\/strong><\/p>\n\n\n\n

Forward curves of Brent Crude Oil and WTI Crude Oil reflected the\ncollapse in prices which occurred in October and November. These markets being\nin contango puts downward pressure on prices. However, the US-China agreement\non the 90-day tariffs moratorium caused most commodity prices to jump.<\/p>\n\n\n\n

OPEC, along with Russia, were expected to announce\nproduction cuts to reduce the oversupply in the global crude oil market. Qatar\nhas said it will leave OPEC in January; however, Qatar\u2019s crude oil production\nis only about 600,000 bpd. Analysts estimate that a production cut of more than\n1 million barrels per day is needed to stabilize or increase prices.<\/p>\n\n\n\n

Corn<\/strong><\/p>\n\n\n\n

Export demand is strong, and that is reflected in the\nrising prices. The Weekly Export Sales report for the week ending on November\n22 was greater than estimated with impressive Accumulated Exports for the New\nMarket Year.<\/p>\n\n\n\n

Soybeans<\/strong><\/p>\n\n\n\n

In contrast to corn, the FAS Weekly Export Sales report shows Soybeans\nWeekly Export Sales at historic lows as Chinese import tariffs significantly\nreduced US soybeans exports. The Accumulated Exports were the lowest in the\nlast 6 years.<\/p>\n\n\n\n

Normally this would indicate lower prices, but President Trump and\nChinese president Xi Jinping at the G20 meeting agreed to a 90-day moratorium\non tariffs. According to the White House, the Chinese have agreed to buy an\nunspecified but “very substantial” quantity of agricultural products.\nPrices in both corn and soybeans gapped up at the opening of trading Sunday\nnight.<\/p>\n\n\n\n

Due to the large amounts of soybeans in storage,\nsoybean calendar spreads are at the lowest values in several years.<\/p>\n\n\n\n

December 11<\/strong><\/p>\n\n\n\n

Energia<\/strong><\/p>\n\n\n\n

The latest CFTC Commitment of\nTraders Report as of Tuesday, December 4, 2018 shows the Non-Commercials\nNet Long Positions decreased during the week by 15,940 contracts to 382,836\ncontracts. 11,569 Long positions were closed and 4,371 Short positions were\nestablished.<\/p>\n\n\n\n

OPEC with Russia have agreed to a\nproduction cut of 1.2 million barrels per day. The expectation is that this\nreduction in output will balance global crude oil supply against demand.<\/p>\n\n\n\n

Prices have remained in the low $50 level as traders\nwait for confirmation of compliance with the output cut. We expect this\ngeopolitical uncertainty to contribute to high price volatility.<\/p>\n\n\n\n

Grains<\/strong><\/p>\n\n\n\n

The USDA WASDE December 2018 report was released\nTuesday, December 11, 2018. US Corn Ending Stocks will support US corn prices,\nbut the World Ending Stocks continue at record levels. US and World Ending\nStocks remain bearish to soybeans prices.<\/p>\n\n\n\n

December 18<\/strong><\/p>\n\n\n\n

Energia<\/strong><\/p>\n\n\n\n

Crude oil prices are under pressure after stocks at the storage hub of\nCushing, Oklahoma increased by more than 1 million barrels during the week ending\nDecember 14, according to the oil research firm Genscape. Cushing is the\ndelivery point for the NYMEX WTI futures contract and prices there impact\nnational crude oil prices.<\/p>\n\n\n\n

Prices have remained low as traders are concerned that\nplanned supply cuts by OPEC with Russia will not be enough to re-balance\nmarkets. The agreement is to reduce output by 1.2 million barrels per day\nstarting in January for six months. However, US shale oil output is growing,\ntaking market share from the big Middle East oil producers in OPEC. <\/p>\n\n\n\n

Grains<\/strong><\/p>\n\n\n\n

Soybean exports continued to be substantially lower\nthan previous years due to the lack of exports to China. The 90-day suspension\nof Chinese tariffs has allowed Chinese buyers back in US markets, but the\ninitial orders were smaller than expected. Unless exports to China increase\nsubstantially, the downward pressure on US prices will continue.<\/p>\n\n\n\n

The full content of our weekly commentaries can be\naccessed on our website at www.fundamentalanalytics.com\/articles<\/a>.\nWeekly commentaries and updates will be free until April. Effective April 2019,\na subscription will be required in order to receive them. Of course, clients of\nFundamental Analytics and BlackSummit Financial Group will continue receiving\nthem for free. <\/p>\n\n\n\n

What to Watch in the\nUpcoming Weeks:<\/strong><\/p>\n\n\n\n

Below are a few things to watch\nin early\/mid-January of 2019. These factors are likely to impact energy and\nagricultural markets.<\/p>\n\n\n\n